By Jikku Joseph
FINTECH start-ups around the world are creating incredible software that allows people to easily manage their money, but unless established institutions partner with these start-ups, financial wellness in South Africa will remain a pipe dream.
Where does the journey to financial wellness begin? Ask anyone who has walked the path, or any qualified advisor who can show you the way, and they will tell you that it begins with understanding your spending. You can only start saving if you have a clear picture of where your money is going each month.
This is surprisingly difficult. In times gone by, the diligent few kept spreadsheets or handwritten ledgers; they filed grocery store receipts and counted bank notes into envelopes.
Things became a little easier when banking moved online. Monthly statements are easier to access and search than their paper equivalents, but they’re still dense documents that require a healthy dose of patience and time to decipher.
Online banking quickly became ubiquitous and other technologies emerged that altered the money landscape even further.
E-wallets and apps like Zapper, Ozow and Yoco give us so many ways to pay and be paid, and everything we need is available right on our phones. As long as you have some mobile data, you’re instantly connected to your finances.
And yet, despite all these amazing advances, money management tools remain stubbornly out of reach. This is one of the reasons why South Africans are so bad at saving – and why financial security remains a fiction for millions of people.
Adapt or be left behind
That’s not to say that the tech doesn’t exist. It does. Start-ups all over the world have developed beautiful, intuitive products that help individuals track and manage their spending so that they can save.
The problem is that these start-ups are comparatively tiny compared to banks and other established financial institutions, and the onus is on the individual to research a particular product and sign-up.
Imagine a world, however, where this is flipped around. Imagine if your bank offered you a dead simple digital tool to manage your monthly expenses – a tool that categorises your spending and shows you at a glance exactly where your money goes. If everyone had easy access to that kind of technology, just think how many more people would turn their financial lives around.
There’s a good business case to be made for this. If a financial institution offers digital money management tools to its customers, that institution will quickly gain a far deeper understanding of how their customers interact with money, resulting in data that can be used to inform product development.
Better, more targeted products will have a greater chance of being taken up – doubly so, thanks to financially secure customers having more disposable income at the end of each month.
It’s true that some banks and other institutions offer basic budgeting tools on their websites or via their apps, but these tools pale in comparison to what is available on the market independently.
Open finance is also gaining traction and data-sharing with customer consent is becoming more commonplace. Financial institutions need to understand that the closed loop model is no longer viable. People don’t like to feel trapped in a single ecosystem and they’ll switch in droves the minute a more customer-focussed competitor arrives on the scene.
It all boils down to scale. Digital money management tools are available, but the only way for them to gain mass-market traction is if financial institutions partner with the developers of these tools and roll them out en masse. The recent riots and looting were symptomatic not only of a broken political system, but also of the desperation that comes from poverty.
Covid has wrecked the economy and it will take a very long time to stabilise and rebuild. Against that backdrop, every financial institution has a social responsibility to uplift South Africa. One way to start is by offering customers the right tools to take control of their finances.
Joseph is the MD of budgeting at 22seven.
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